Answer: 5.

## Explanation Under the revaluation model: 1. **Initial purchase cost**: €20 million 2. **After first revaluation**: Carrying amount = €18 million (a decrease of €2 million from purchase cost) - This €2 million decrease would typically be recognized as an impairment loss in profit or loss (not revaluation surplus) 3. **After second revaluation**: Carrying amount = €23 million **Calculation of revaluation surplus increase from second revaluation**: - Carrying amount before second revaluation = €18 million - Carrying amount after second revaluation = €23 million - **Increase in value** = €23 million - €18 million = €5 million This €5 million increase represents the revaluation surplus that would be recognized in other comprehensive income and accumulated in equity under the revaluation surplus account. **Why not €2 million or €3 million?** - €2 million would be the recovery of the previous impairment loss (€18 million to €20 million), but the asset is now valued at €23 million, which is €3 million above the original cost. - €3 million would be the amount above original cost (€23 million - €20 million), but the question asks for the increase from the second revaluation specifically, which is the full €5 million increase from the carrying amount before the revaluation (€18 million) to the new carrying amount (€23 million). **Key accounting principle**: Under IAS 16 Property, Plant and Equipment, when an asset's carrying amount is increased as a result of a revaluation, the increase is recognized in other comprehensive income and accumulated in equity under the heading of revaluation surplus. The increase is measured from the carrying amount immediately before the revaluation.

Author: LeetQuiz .